Comments on: Don’t I Lose Tax Benefits If I Pay Off My Mortgage Early? http://www.yourtwobits.com/157/dont-i-lose-tax-benefits-if-i-pay-off-my-mortgage-early Budget. Save. Invest. Live. Wed, 28 Jul 2010 04:31:03 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Cal http://www.yourtwobits.com/157/dont-i-lose-tax-benefits-if-i-pay-off-my-mortgage-early/comment-page-1#comment-580 Cal Wed, 28 Jul 2010 04:31:03 +0000 http://www.yourtwobits.com/?p=157#comment-580 Of course, it is not wise to spend $6,500 to obtain $1,400. The points you are missing in this simple analysis are the lost investment opportunity and time value of money. If you have a low interest rate (as are available today), such as 4.5%, then the question becomes "can you invest the money that you would use to pay-off your mortgage early for a greater return?" If you can invest at a 10% return, for example, then you get the 5.5% gain plus the tax benefit. Also, recognize that the money you are paying for your mortgage is with future lower value dollars (time value of money, inflation takes its toll). Inflation figures average around 3.5 to 4%. I've heard people make the discipline argument (that most people won't invest), but if you use that same discipline that helps you make those prepayments, you're better off. If you don't want to learn to invest, then that is your choice, but don't try to convince others that the "peace of mind" is worth the trade-off of a better financial future. Of course, it is not wise to spend $6,500 to obtain $1,400. The points you are missing in this simple analysis are the lost investment opportunity and time value of money. If you have a low interest rate (as are available today), such as 4.5%, then the question becomes “can you invest the money that you would use to pay-off your mortgage early for a greater return?” If you can invest at a 10% return, for example, then you get the 5.5% gain plus the tax benefit. Also, recognize that the money you are paying for your mortgage is with future lower value dollars (time value of money, inflation takes its toll). Inflation figures average around 3.5 to 4%.

I’ve heard people make the discipline argument (that most people won’t invest), but if you use that same discipline that helps you make those prepayments, you’re better off.

If you don’t want to learn to invest, then that is your choice, but don’t try to convince others that the “peace of mind” is worth the trade-off of a better financial future.

]]> By: DebtFreeDave http://www.yourtwobits.com/157/dont-i-lose-tax-benefits-if-i-pay-off-my-mortgage-early/comment-page-1#comment-27 DebtFreeDave Sat, 14 Mar 2009 01:29:14 +0000 http://www.yourtwobits.com/?p=157#comment-27 In my state (PA), we can't deduct mortgage interest, so in my case, the difference is even less...this is such a no-brainer, yet many people seem to miss it entirely. I don't get why... In my state (PA), we can’t deduct mortgage interest, so in my case, the difference is even less…this is such a no-brainer, yet many people seem to miss it entirely. I don’t get why…

]]> By: seth http://www.yourtwobits.com/157/dont-i-lose-tax-benefits-if-i-pay-off-my-mortgage-early/comment-page-1#comment-18 seth Mon, 02 Mar 2009 19:03:01 +0000 http://www.yourtwobits.com/?p=157#comment-18 They’re trying to make it so if you make over a certain amount you can only write off 2/3 of your mortgage interest . . . just solidifies the fact that debt is always crappy, no matter how you play with the numbers. They’re trying to make it so if you make over a certain amount you can only write off 2/3 of your mortgage interest . . . just solidifies the fact that debt is always crappy, no matter how you play with the numbers.

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